The U.S. Securities and Exchange Commission (SEC) has decided to drop its appeal in the ongoing legal case involving Ripple. The SEC’s decision not to challenge the 2023 ruling by U.S. District Judge Analisa Torres brings much-needed clarity to the question of whether XRP should be classified as a security.
Judge Torres had previously ruled that Ripple’s “programmatic sales” of XRP on secondary exchanges did not violate securities laws. However, the direct sale of XRP to institutional investors was found to be in violation of securities regulations. With the SEC choosing not to appeal, this ruling stands as a key precedent in the cryptocurrency space.
As part of the settlement, the SEC has agreed to return $75 million of the $125 million fine originally imposed on Ripple by a New York judge in 2022, leaving $50 million to settle the case.
Amid the excitement, one user on X (formerly Twitter) commented that the lifting of the SEC’s injunction would now allow Ripple to sell directly to institutional investors. The user said that while Ripple would still need to adhere to securities laws, it would no longer be required to go through over-the-counter (OTC) desks and could sell directly to entities like hedge funds or private equity firms.
However, former SEC attorney Marc Fagel clarified that while the injunction is lifted, the original ruling that Ripple’s sales to institutional investors violated the law still stands.
Fagel explained that while the SEC will no longer pursue enforcement of the case, Ripple’s sales to institutional investors may still face legal challenges under Section 5 of the Securities Act if they are conducted in a similar manner as before.
When asked about the impact on Ripple’s On-Demand Liquidity (ODL) product, Fagel responded that the ruling would likely alleviate some of the restrictions Ripple faced, particularly regarding how it could sell XRP. However, he warned that if Ripple were to resume sales in the same manner as those deemed illegal, it could still face legal issues, though the SEC would no longer actively pursue enforcement.
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